Why and when should a startup go public?

Tomasz Tunguz / November, 2017

Description

Tomasz Tunguz, Partner at Redpoint Ventures explains three reasons to why you would go public.

Video Transcript

Why and when should a startup go public?

Startups go public for a bunch of different reasons. The first is that they need capital. They’ve raised raise a bunch of money in the private markets and all of a sudden they need to raise a huge amount of money. The best place, historically, if you needed to raise 100 million dollars or more the private markets couldn’t supply that amount of capital. The way that you needed to find that money is to go and sell institutional investors and retail investors. The only way you can do that in the US is going public.

One reason is to raise another equity round to finance the growth of the business. The second reason is about credibility. When you say you are a public traded company there is a certain connotation of having attained success and being an important business and that helps you, one, to close and sell customers, two to hire and retain talent. It just gives an era of prestige. The third reason is to provide liquidity to both your employees and early investors. So at some point, people want to realize or unlock the value stored in their equity, in their options, and the best way to do that is in the public markets.